COMMUNITY BANK CEO Only Exceptional Candidates Need Apply
By Carll Wilkinson While Brian Moynihan and Jaime Dimon might disagree, I contend that community bank CEOs have the hardest job in the industry. The persistently difficult interest rate environment, the pace of dynamic technological change, the unlimited competition created by online and mobile access and the frustrating, expensive and demoralizing smother of excessive regulation, all without the resources and economies of scale available to larger institutions, have created an operating environment that requires community bank CEOs to be better than ever before. Retirements are expected to accelerate over the next five years. The average age of community bank CEOs hovers at about 60 nationally, and boards will be expected to identify candidates with the right skill set, vision and temperament to compete in the new normal environment. What to look for? On the one hand, boards must look for a candidate with an exceptional executive skill set, and this is industry-agnostic, across industry lines, whether it be banking, construction, hi-tech or consumer package goods. How do candidates think strategically, solve problems, communicate, collaborate, handle adversity, mentor, coach, build teams, delegate, make decisions and maintain a moral compass? Do they have above average intellect? Are they passionate? Will they view success or failure as something deeply personal, or do they think they are passive players in a bigger game? Can they take ownership? Are they loyal, to the organization, to the board and to the employees? Diagnosis of the executive skill set looks for the best athlete; someone with strong fundamental executive talents, and this person could theoretically come from anywhere. On the other hand, boards must seek an appropriate technical skill set, one that is industry specific, particular to commercial and
retail banking only. The technical skill set provides context, memory and a frame of reference. And while a CEO’s role is never primarily a technical position, the smaller the bank, the more technically demanding the role. Do candidates have a comprehensive grasp of the key technical elements of the business? Do they understand the evaluation of credit risk across loan types and market segments? Have they mastered the dynamics of balance sheet management and asset liability management? Do they have existing relationships with other bankers, regulators, auditors and external consultants? Do they already know the competition, understand the competitive dynamics of the industry, have an intuitive feel for the personalities in various roles and understand how the business model has changed and shifted the skill sets required for success across functions? The executive skill set speaks to a candidate’s ability to be successful over the long term; the technical skill set speaks to how quickly a candidate will ramp up based on prior experience, and shortens the learning curve intrinsic to tackling any new role. No leader is perfect, and boards will always be faced with this reality in approaching a selection decision. But, the right CEO candidate must present a majority of the following characteristics: True strategic thinking: Remember the hackneyed “3-6-3 rule” (deposits at 3 percent, loans at 6 percent, golf at 3 PM)? It was a strategy (and a golf schedule) before the new normal, and the fact is, the only easy money in banking was made a long time ago, when net-interest margin was relatively easy to maintain, geographic barriers to competition kept customers secure, compliance was light Continued on page 18
BANKING NEW ENGLAND
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